State Strategies for Covering Uninsured Adults

Assessing the New Federalism is a multiyear Urban Institute project designed to analyze the devolution of responsibility for social programs from the federal government to the states, focusing primarily on health care, income security, employment and training programs, and social services. Alan Weil is the project director. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.

Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute's Web site: http://www.urban.org. This paper is one in a series of discussion papers analyzing information from these and other sources.

The project has received funding from the Annie E. Casey Foundation, the W.K. Kellogg Foundation, the Robert Wood Johnson Foundation, the Henry J. Kaiser Family Foundation, the Ford Foundation, the John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, the David and Lucile Packard Foundation, the McKnight Foundation, the Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, the Fund for New Jersey, the Lynde and Harry Bradley Foundation, the Joyce Foundation, and the Rockerfeller Foundation.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Contents

INTRODUCTION

STATE STRATEGIES FOR COVERING UNINSURED ADULTS
1. Traditional Medicaid
        Medicaid Rules, Requirements, and Structure
        Medically Needy Programs
        Transitional Medicaid Assistance
        The Health Insurance Premium Payment Method

2. State-Funded Initiatives
        Washington (Basic Health Plan)

3. Medicaid Section 1115 Waivers
        Expansion to Adults under Section 1115 Waiver Authority
              Delaware
              Hawaii
              Minnesota
              Oregon
              Tennessee

4. State Options under the State Children's Health Insurance Program
        Cost-Efficacy
        Crowd-Out
        Cost-Sharing and Benefit Requirements

5. Medicaid Section 1931: Family Coverage Category
        CHIP and Section 1931
        Comprehensive Section 1931 Expansions
        Incremental Section 1931 Expansions

6. Combination Approaches
        Massachusetts
        Missouri
        New York
        Rhode Island
        Vermont
        Wisconsin

7. Conclusions

INTRODUCTION

Recent efforts to expand health insurance have focused primarily on children. Medicaid coverage of children and pregnant women has been expanded several times since the late 1980s. More recently the Children's Health Insurance Program (CHIP) has further increased the opportunities for states to expand coverage for children. However, recent data suggest that there are even greater problems of uninsurance among low-income adults. Low-income adults are more likely than children to be covered by employers but much less likely to be covered by public programs. As a result, they are substantially more likely to be uninsured. Recent data from the National Survey of America's Families show that 17 percent of adults at all income levels lacked health insurance, versus 12 percent for children. Below 200 percent of the federal poverty level (FPL), 37 percent of adults lacked insurance versus 21 percent for children.

States have several options to provide health insurance to adults who are uninsured. These include traditional Medicaid, exclusively state-funded programs, and state Medicaid Section 1115 waiver initiatives, which are often used in conjunction with state-funded programs. In addition, a few states have extended coverage to adults in families through CHIP. Medicaid and state-funded programs to insure adults have been in existence for years, but recent legislation has created new opportunities under Medicaid and CHIP to obtain federal matching funds. The most important of these is Section 1931 of the Social Security Act, which considerably increases states' ability to extend Medicaid coverage to both parents and children in low-income families. States are also using interesting combinations of Section 1115, Section 1931, and CHIP funding authorities to craft new designs to cover adults.

In this paper we describe in greater detail all of the available mechanisms that states have to cover low-income adults. We address what states are permitted to do under current law and what several states are currently doing or beginning to implement. Table 1 provides an overview of the state programs to cover adults (those beyond traditional Medicaid), indicating the type of program, the target group of eligibles, and the income level to which coverage is extended. Table 1 shows there is considerable variety in these programs in terms of which adults are targeted, how far up the income distribution states have extended coverage, and what funding approaches have been used. The table also documents that the majority of states (36) have not taken these kinds of steps to cover uninsured adults.

Because of the limitations to these currently available provisions, some federal legislation would probably be necessary to substantially increase coverage for low-income adults. This could take the form of easing the restrictions that now exist for using CHIP funds for working parents, making new matching funds available for state-subsidized insurance programs for low-income adults similar to those now existing for children, or, alternatively, using tax credits for health insurance.

We begin with background information on insurance coverage of adults. The top panel of table 2 shows that 41.5 percent of adults with incomes below 100 percent of the FPL are uninsured, as are 33.5 percent of those with incomes between 100 and 199 percent of the FPL. Because some recent proposals (Vice President Gore, the Clinton administration) would extend coverage to parents, we provide data on insurance coverage of adults with children and adults without children. Of adults with children, 42 percent are uninsured, compared with 41 percent of adults without children. Compared with adults without children, those with children are more likely to be covered by Medicaid and less likely to have employer-sponsored insurance or private nongroup coverage. The likelihood of being uninsured declines as income increases. But because the uninsurance rates for those below 200 percent of the FPL are so high, almost two-thirds of the uninsured are below 200 percent of the FPL.

Table 3 shows the distribution of insurance coverage by various characteristics-age, family work status, race/ethnicity, and state. The percent of adults who lack insurance is highest for those between the ages of 19 and 34 and lowest for those ages 55 to 64. However, almost one-quarter of those low-income adults ages 55 to 64 lack health insurance.

Table 3 shows that uninsurance rates are over 35 percent for low-income adults who are in families with at least one worker. Almost two-thirds of uninsured low-income adults (11.5 million) are in families with at least one full-time worker (by contrast, only 29.9 percent of adults in families with no worker lack health insurance) because many are eligible for Medicaid.

Health insurance coverage varies by race and ethnicity. While only 31.5 percent of white non-Hispanics are uninsured, white non-Hispanics make up about half of the low-income uninsured population (8.7 million out of 17.6 million). The highest rate of uninsurance is among Hispanics, among whom 52.6 percent of adults with incomes below 200 percent of the FPL are uninsured. Low-income black non-Hispanics have an uninsurance rate of 34.1 percent.

Finally, uninsurance rates vary among states. This is largely because of the variations in employer-sponsored coverage. The rate of employer-sponsored coverage for low-income adults ranges from a low of 29.1 percent in California to 51.4 percent in Wisconsin. Medicaid and other public coverage offset low rates of employer-sponsored coverage to some degree. Public programs cover more than 20 percent of low-income adults in states such as Massachusetts (21.0 percent), Minnesota (22.9 percent), and New York (23.4 percent), but coverage is substantially lower in other states such as Colorado (9.2 percent) and Texas (11.0 percent). The result is that the rate of uninsurance varies from a low of 20.7 percent in Minnesota and 27.4 percent in Wisconsin to highs of 43.8 percent in California and 49.9 percent in Texas.

Data in table 4 suggest that the lack of health insurance has significant consequences. The table divides low-income adults into those with children and those without. The former, in principle, might be reached through public policies that extended coverage to low-income children covered by Medicaid or CHIP. After controlling for several covariates, uninsured low-income adults with children are significantly more likely than those who are insured to be in only fair or poor health (23.8 versus 17.7 percent), to lack a usual source of care or rely on an emergency room (37.8 versus 16.6 percent), to lack confidence in their access to care (23.8 versus 7.2 percent), and to have unmet needs for medical care or surgery (14.6 versus 7.2 percent).

Table 4 also shows that uninsured low-income adults without children are more likely than those who are insured to lack a usual source of care (45.4 versus 20.2 percent), to lack confidence in their ability to gain access to care (28.7 percent versus 12.8 percent), to have unmet needs for medical care or surgery (15.2 versus 8.6 percent) or prescription drugs (9.9 versus 5.5 percent), and to be dissatisfied with the quality of care they are receiving (15.4 versus 10.7 percent).

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The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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